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Pacific Perspective

TUNG BUI

Sunday, November 17, 2002


Tech-minded China
still has long way to go
to catch Silicon Valley


HIGH-TECH in China: Is it a threat to Silicon Valley?

That is the question BusinessWeek attempted to answer in a recent cover story. Highlighting recent achievements of the high-tech industry in China, BusinessWeek signals a new area of global coopetition -- a strategy that combines cooperation and competition -- between "The Land in the Middle" and the rest of the world.

On the one hand, there are clear indications that Western CEOs should worry about the next wave of Chinese competition. With more than 465,000 new graduates in science and engineering -- approaching the outputs of Japan and the United States -- entering the job market, China is poised to elevate its successful and popular low-cost consumer electronics industry into a potential globally cost-effective competitor in chips, telecom, software, and even value-added services.

On the other hand, there are greater economic forces that push toward a more intense cooperation, offering technology transfer in exchange for cost-effective research and development, cost-efficient production and huge market potentials.

BusinessWeek reminds its readers that China still trails far behind the West in a number of critical high-technology areas, such as the production of semiconductors and the penetration of personal computers and the Internet. China seems to have a remedy for these weaknesses. It is aggressively looking for ways to attract greater foreign investment and technology transfer under the World Trade Organization framework, provide unprecedented incentives to lure its brightest minds back home, and foster a stronger partnership with the best technology leaders in the world.

This model has worked for Singapore and Taiwan. There is no reason why it would not work for China. If this scenario works, the future looks rosy -- for both China and its foreign competitor-partners. Moreover, the economists at BusinessWeek might be right by claiming that China is on its way to becoming the next tech giant.

However, the day China overtakes Silicon Valley, if it does occur, is not in the foreseeable future. Our research indicates a nation's ability to compete in the new economy is characterized by its readiness to combine R&D, entrepreneurship, business and technological innovation and diffusion, government spending, together with a culture conducive to international business. This suggests China has yet to improve in several areas, and emphasizing technology actually seems to be one of the easiest and quickest ways to deal with these issues. Among China's major hurdles are weakness in public governance, rule of law, protection of property rights, business education and poor national computer infrastructure. In a global economy marked by intense, relentless, and fast-paced innovation, these hurdles still constitute serious stumbling blocks in China's race against Silicon Valley.

In the coming years, if the high technology sector in China does mature, and if competition does not prohibit international cooperation in this area, a more high-tech China is good news for China and the rest of the world.


Tung Bui is the Matson Navigation Co. Distinguished Professor of Global Business. Reach him at tbui@cba.hawaii.edu



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